Challenges in implementing competition law in A

1. May’25,2015
UNIVERSITI KEBANGSAAN MALAYSIA
SEMESTER II SESI 2015/2016
IJAZAH SARJANA UNDANG-UNDANG
International Law & 3rd World Countries (UUUK 6175)
The challenges of implementing
Competition Policy & Law in
Asean at the Regional &
National Level
Prepared by: MAS&INDO team

2. May’25,2015
CONTENTS
1) Introduction
2) Issues
3) Brief Glance on Competition Policy & Law
4) The Challenges of Implementing Competition
Policy & Law in AEC
5) Conclusion & Recommendations

3. May’25,2015
CONTENTS
1) Introduction
2) Issues
3) Brief Glance on Competition Policy & Law
4) The Challenges of Implementing Competition
Policy & Law in AEC
5) Conclusion & Recommendations

4. May’25,2015
2020
1967 1997 2003
Adopt AEC Blueprint
Bangkok Declaration ASEAN CommunityCebu Declaration
2007
2015
ASEAN Vision 2020 Bali Concord II
ASEAN Community:-
that can achieve higher levels
of economic dynamism,
sustained prosperity,
inclusive growth and
integrated development of
ASEAN.
Target
Single market and
production Base
Focus
Competitive
Economic Region
Equitable Economic
Development
Integration into the
Global Economy
 Free flow of
goods
 Free flow of
services
 Free flow of
investments
 Free flow of
capital
 Free flow of
skilled labor
 Priority
integration
sectors
 Food,
agriculture
and forestry
 Competition
Policy
 Consumer
protection
 Intellectual
property
rights
 Infrastructure
development
 Taxation
 E-commerce
 SME
development
 Initiative for
ASEAN
integration
 Coherent
approach
towards
External
Economics
Relations
 Enhanced
particpation
in global
supply
networks
Human Resource Development
Research & Development
2014
Post-2015
ASEAN
THE ASEAN ECONOMIC STRATEGIES
Objectives:-
• To identify the challenges faced in implementing the
competition policy & law in ASEAN member states
• To identify steps taken to narrow down the gap in
implementation of the competition policy in ASEAN
states that have not implement competition policy
• To identify whether there is any element of
fragmentation and the impact of it.

5. May’25,2015
CONTENTS
1) Introduction
2) Issues
3) Brief Glance on Competition Policy & Law
4) The Challenges of Implementing Competition
Policy & Law in AEC
5) Conclusion & Recommendations

6. May’25,2015
ASEAN Economic Community:-
• Single Market and Production Base
• Competitive Economic Regions
• Equitable Economic Development
• Integration into Global Economy
THE ASEAN Economic Community Objectives
 Which member states that have not
yet implement their National
Competition Policy?
 For those member state that have
implement competition policy and
law → is there any diversification in
the framework and
implementation?
 Does the differences in the
f/work causes any problem at
regional level?
 Is there any way to harmonize
the differences?
 National level: is the
competition law applicable to
all industries?
 To have a highly competitive
economic region
 Why the delay in
implementation?
Issues Identified

7. May’25,2015
CONTENTS
1) Introduction
2) Issues
3) Brief Glance on Competition Policy & Law
4) The Challenges of Implementing Competition
Policy & Law in AEC
5) Conclusion & Recommendations

8. May’25,2015
In a Nutshell:- Brief information on Competition Policy
1) Definition of Competition Law:-
The British Competition Commission defined competition as “a process of rivalry between business seeking to
win over customers.”
2) General Concept of Perfect Competition:-
Consumer Surplus means:- a
value of the goods for the
consumer is higher than the
actual price paid.
Etc: Value of Goods is RM7, but
Customer pays RM6.
Producer Surplus means:-
When there is a difference
between selling price and actual
value of the goods
Example of perfect market competition:-
A ( a seller) think the value of his goods are worth RM5 and B (a buyer) thinks that the goods is worth RM7. The result of
perfect competition will be when A sells his goods at a price in between i.e RM6.
Result:- A as the producer is making a producer surplus of RM1 – as he sold the goods more than he had valued and at the
same time, B as a consumer has made a consumer surplus as he could buy the goods less than what he expected.

9. May’25,2015
3) General Concept of Competition Policy Framework:-
4) Objectives & Benefits of Competition Law:-
a) Control the market structures and behavior and the redistribution of wealth and power;
b) To guarantee the operations of effective market mechanism;
c) To protect the competition process itself and ensure that the firms operating in the market do not harm competition.
d) It forces the market players or undertakings to be more efficient, innovative and responsive to consumer demand.
In a Nutshell:- Brief information on Competition Policy
General concept of
Competition Policy
Abuse Based System Prohibition Based System
• The control item is based upon
some finding of an abuse
behavior.
• Any undertakings or
agreements that have effect on
competition are usually allowed.
• Once the abuse behavior has
been established, then the
agreement will be found against
competition law.
• It will look immediately at the
starting point of the agreement
whether the intention is to
restrict or hinder competition.
• If it does have, then this
agreement is prohibited.

10. May’25,2015
Agreements (which are horizontal or vertical, which have object of hindering
competition will be prohibited.
Supplier Supplier Supplier
Wholesaler
Distributor
Customers
Horizontal Agreements
Vertical Agreements
KEY POINT: Horizontal and vertical agreement between
enterprises are PROHIBITED if their OBJECT or EFFECT
is to SIGNIFICANTLY PREVENT, RESTRICT, DISTORT
COMPETITION
In a Nutshell:- Prohibition in Competition Policy

11. May’25,2015
Agreements (which are horizontal or vertical, which have object of hindering
competition will be prohibited.
Supplier Supplier Supplier
In a Nutshell:- Prohibition in Competition Policy
Horizontal Agreements
Key point: Horizontal agreements between enterprises which have the object to:-
• Price fixing
•Fix trading conditions
•Limit or control production, market outlets, market access, development, technology, investments
•Bid rigging
ARE PROHIBITED
Bid rigging
Controlling market outlets
Examples of prohibited horizontal agreements
Cartel activity

12. May’25,2015
Agreements (which are horizontal or vertical, which have object of hindering
competition will be prohibited.
Supplier
Wholesaler
Distributor
Customers
Vertical Agreements
In a Nutshell:- Prohibition in Competition Policy
Key point: Vertical agreements which are at different levels of suppliers who
have the object such as:-
•Resale price maintenance, fixed price
•Exclusive territory
•Exclusive purchase/supply @ tying
•Non-compete
ARE PROHIBITED
Fixed pricing
Exclusive territory & No
discount
Exclusive supply
Tying purchase
Examples of prohibited vertical agreements

13. May’25,2015
In a Nutshell:- Prohibition in Competition Policy
Factors indicating dominance:
•Large market share
•Market concentration
•Barriers to entry & exit
•Degree of buyer power
Not an offence to be dominant but if abuse the dominant position, it is an
OFFENCE
Examples of abuse of dominant position
Predatory behaviour
Controlling market outlets
Buying up scarce intermediate goods required by
competitors without justifiable reasons Abuse bargaining position
Discrimination

14. May’25,2015
CONTENTS
1) Introduction
2) Issues
3) Brief Glance on Competition Policy & Law
4) The Challenges of Implementing Competition
Policy & Law in AEC
5) Conclusion & Recommendations

15. May’25,2015
ASEAN Economic Community:-
• Single Market and Production Base
• Competitive Economic Regions
• Equitable Economic Development
• Integration into Global Economy
THE ASEAN Economic Community Objectives
 Which member states that have not
yet implement their National
Competition Policy?
 To have a highly competitive
economic region
 Why the delay in
implementation?
Challenge No. 1
 Does the differences in the
f/work causes any problem at
regional level?
 Is there any way to harmonize
the differences?
 National level: is the
competition law applicable to
all industries?
 For those member state that have
implement competition policy and
law → is there any diversification in
the framework and
implementation?

16. May’25,2015
ASEAN
MEMBER
STATES
National
Competition
Law
Authority
administering
the National
Competition
Law
Does the
agency
also take
on
functions
to protect
consumer
interests?
Are there
specific
sectors that
come under
sectorial
regulators
with own
competition
law?
Prohibition on
anti-
competitive
Agreements?
Prohibition
against
abuse of
dominant
position
Prohibitions
against anti-
competitive
mergers
Main
exemption
from the
Competition
Law
Adjudication
Appeal
Leniency
Program
Does
national
competition
law have
settlement
provisions?
Criminal
liability for
breaching
prohibitions
against anti-
competitive
conduct?
Rights
of
private
action
Brunei
Is in the
process of
drafting
Not available
Not
available
Not
available
Not available
Not
available
Not
available
Not
available
Not available
Not
available
Not
available
Not
availab
le
Cambodia
Is in the
process of
finalizing the
draft
Proposed to
be Cambodia
Competition
Commission –
might change
No. There
is another
agency
No sectorial Yes Yes No
Yes – and
this law does
not apply to
small
business
Yes Yes Yes
Not
availab
le
Lao PDR
Is in the
process of
drafting new
law
Division on
Consumer
Protection &
Competition
Yes Yes Not available
Not
available
Not
available
Not
available
Not available
Not
available
Not
available
Not
availab
le
Myanmar Still drafting Not available
Not
available
Not
available
Not available
Not
available
Not
available
Not
available
Not available
Not
available
Not
available
Not
availab
le
Challenge No. 1:- Why BCLM have not implement Competition Policy?
The current status of competition policy in BCLM

17. May’25,2015
BCLM Difficulties in Implementing Competition Policy at the National Law
ASEAN Member States Justifications
Brunei It’s a small country and are looking at the suitable system for their country.
Cambodia Due to global financial crisis, it gave impact on their export activities. Due to that they have to restructure
their structural policy.
For example:- they are focusing on agricultural development and rural infrastructure;.
Challenges faced:-
The challenge of building and upgrading its infrastructure for example in its agricultural sector, to turn it into
the commercial mainstream. Milled rice exports could become and engine and thereby will be able to help
reduce poverty. However it will be not be able to do so if the export procedures have not been streamlined
and the milling process made more efficient.
The challenge of creating productivity in human capital development. Cambodia’s education and technical
and vocational education and training systems must be reformed where the enrolment rates at all levels are
very low.
Laos PDR Reformed national policies:-
Policy instruments that sustain high growth along controlling inflation;
Diversifying product structures for export;
Fiscal reforms
Challenges faced:- to diversify its products and services for export and challenges in human capital
development.
Myanmar Reformed national policies:-
Extensive agenda of reforms are needed – fiscal reforms, regulatory reforms and social reforms,
Development of financial framework
Challenges faced:- pre 2010, its political scenario was not stable which led to less foreign investment.
However, post 2010, there have been political reforms and it is expected that due to its stability, will create
the interest of foreign investors
Common problems that CLM faced are:- lack of technical assistance, the needs are different in terms of capacity
building, lack of experts, lack of training and exposure in preparing project proposal paper and lack of coordination
among the line agencies at the national level & among relevant ASEAN Sectorial bodies at regional level.

18. May’25,2015
 Does the differences in the
f/work causes any problem at
regional level?
 Is there any way to harmonize
the differences?
 National level: is the
competition law applicable to
all industries?
ASEAN Economic Community:-
• Single Market and Production Base
• Competitive Economic Regions
• Equitable Economic Development
• Integration into Global Economy
THE ASEAN Economic Community Objectives
 Which member states that have not
yet implement their National
Competition Policy?
 To have a highly competitive
economic region
 Why the delay in
implementation?
Challenge No. 2
 For those member state that have
implement competition policy and
law → is there any diversification in
the framework and
implementation?

19. May’25,2015
ASEAN-6 : Differences in Competition Law Framework
Competition Law
Framework
Indonesia Thailand Singapore Malaysia Philippines Vietnam
Prohibition on
Vertical Agreement
Not expressly
mention
Not expressly
mention
Expressly excluded Expressly included
in s. 4 CA 2010
Not expressly
mention
Not expressly
mention
Threshold for abuse
of dominant
position
a) Single entity:-
market share
50% and above
b) More than one
enterprise:-
market share of
75% and above
a) Single entity:-
market share
50% and above
b) More than one
enterprise:-
market share of
75% and above
There is no
presumptive
market share
threshold as market
share on its own
does not determine
market dominance.
However an
undertaking with a
market share of
60% and above is
likely to indicate
market dominance.
There is a
presumptive
market share
threshold and
market dominance
is determined by
applying the SSNIP
Test, i.e. a price
range of 5%-10%
increase to
represent a small
but significant
increase in price to
determine the
relevant market
Abuse based
system – where
the monopolies
are not
prohibited per se
but may exists to
aid the Govt. in
carrying on an
enterprise or to
aid in the
performance of
various services
& functions in
the interest of
the public.
a) Single entity:-
market share
30% and above
b) Combine 2
enterprise:-
market share
of 50% and
above
c) Combine 3
enterprise:-
market share
of 60% and
above
Mergers process
and mergers
threshold
• Art.28
• Need to notify
merger to
authorities
• No filling fees
• Approval
process: 90 days
maximum
• Sec. 26
• If mandatory
merger and
threshold met,
must notify
• But currently no
threshold
defined
• No filling fees
• Approval
process: 95 days
maximum
• Sec. 54
• Not compulsory
to notify – but
encouraged
• Encouraged to
do self-
assessment
• Have filling fees
• Approval
process: 120
days maximum
• No merger
control at
present
Mergers of listed
companies
requires prior
approval the
Securities
Exchange
Commission
before becoming
effective.
• Sec.16
• Mandatory
merger
notification if
threshold are
met.
• Have filling fees
• Approval
process: 105
days maximum
Challenge No. 2 (a) :- Does the diversification in different competition
law poses problems at the regional level?

20. May’25,2015
ASEAN-6 : Differences in Competition Law Framework
Competition Law
Framework
Indonesia Thailand Singapore Malaysia Philippines Vietnam
Criminal Sanctions Yes Yes No No Yes No
Rights of private
actions
No Yes Yes Yes Yes No
Companies have to comply with the different competition laws applicable in each of the ASEAN member states.
For examples:-
a) Cartels and anti-competitive agreements:- M’sia expressly prohibits vertical agreements that have anti-
competitive objects/effects, while Indonesia, Philippines, Vietnam & Thailand does not expressly prohibits
while Singapore expressly excludes vertical agreements → could cause several hurdles to companies when
dealing with cartel activities.
b) In terms of dominance:- cross borders transactions and companies with high market shares have to ensure
that commercial strategies are applied in the manner that takes into account the differences on dominant
position.
c) In terms of mergers, cross-border mergers have significantly increased within the ASEAN region with the
liberalization of the market and implementation of the free trade and economic partnership agreements.
With the exception of Malaysia, all the five (5) ASEAN member states have a merger control law in place. The
difficulties will arise when the companies are coordinating a merger filing requirement with different
procedural regimes, for example in some of the ASEAN member states, mergers requires mandatory
notification. Therefore, the companies that are planning or coordinating a merger need to plan carefully in
order to avoid penalties for non-compliance.
Challenge No. 2 (a) :- Does the diversification in different competition
law poses problems at the regional level?

21. May’25,2015
Challenge No. 2 (b) :- At national level, are all the industries subjected
to Competition Law ?
State Owned
Enterprise (SOE)
①Concept of Protectionism
Private
Firms/Business
Protected from
Competition Law
Subjected to
Competition Law
Protectionism:- “the state is potentially the best friend
of the would be monopolist. The State can erect and
enforce entry barriers. The State can enact legislations
that hamper the ability of competitors to vie for crucial
inputs or the business of big customers.”
The state protects by creating an uneven playing field
and also by granting benefits to SOEs not offered to
private firms.
① Outright subsidization:- is
when SOEs receive direct
subsidies from Govt. in form of
financial assistance, in kind
benefits such as land usage
②Concessionary financing &
guarantees:- is when the SOEs received
credit benefits directly from Govt. and
interest is below market interests rates.
③Exempted from regulator regimes:-
for example exempted from bankruptcy
rules, given exclusive rights etc in postal
or telecommunications services
④ Justifications by Govt:-
• SOEs are needed to maintain public service
obligations;
• Is a tool for industry policy
• A tool to protect country fiscal revenue
②Examples of Protectionism:-

22. May’25,2015
CONTENTS
1) Introduction
2) Issues
3) Brief Glance on Competition Policy & Law
4) The Challenges of Implementing Competition
Policy & Law in AEC
5) Conclusion & Recommendations

23. May’25,2015
Conclusion:-
1. AEC was not able to meet its target to have all its state members to implement competition policy and law at their national level by 2015 due to
some of members (CLM) internal challenges;
2. About the competition law framework at the regional level, there are differences identified such as the process and procedures for mergers.
3. Meanwhile, at the national level, the implementation of competition law is not realistically applied to all industries since the State Owned
Enterprise are mostly protected from it. This practice indicate a poor corporate governance by the said government.
Recommendations:-
1. CLM is a new member of the ASEAN – the challenges in implementing competition law are due to lack of resources, technical and expert
knowledge, fragmented organization and power to implement competition policy, less political and stakeholders’ support.
2. It is beneficial to CLM to implement competition policy - for example in terms of agriculture, food and forestry, CLM can increase their
productivity for example reducing the costs of inputs, including agricultural tractors, tools and machinery, fertilizers and pesticides and
transport evidences, removal of barriers to trade. By removing this barriers, it will attract foreign investment.
3. Towards harmonizing the different framework in Competition policy in ASEAN, the AEGC had introduced the ASEAN Regional Guidelines on
Competition Policy in 2010. The Regional Guideline on Competition Policy intent to provide a regional harmonization of competition policy and
law to be applied among its member states.
4. Meanwhile for the issue of differences framework of competition law applied by the ASEAN-6 member states, although it is understandable
that cultural, social and economic factors have played in the important role in the design of each jurisdiction competition policy, it is
recommended for the ASEAN-6 to find some common ground among the ASEAN members. At least if all the ASEAN members have a common
clause in competition, it will help to ease any bilateral or regional economic partnership agreement with other countries such as the EU, where
EU has paused negotiations with ASEAN and is now pursuing bilateral Free Trade Agreements with individual ASEAN member states.
5. It will be useful if the ASEAN countries were to implement “competitive neutrality” framework as practiced by the OECD countries. Competitive
neutrality as defined by Australia is it requires that government business activities should not enjoy net competitive advantages over their
private sectors simply by virtue of public sector ownership. These framework address the anti-competitive behavior of the SOEs by establishing
mechanism to identify and eliminate such competitive advantages that the SOEs have such as taxation, financing costs and regulatory
neutrality. By implementing this framework, it can remove resource allocation distortions arising out of public ownership and improve
competitive processes.
Conclusion & Recommendations

24. May’25,2015